Markets Mark Time Ahead of the Fed

Both equity and bond markets could react dramatically to the Fed today, because so much easing is already priced in.

Key Takeaways

• Interest Rates Are The Key Driver of Equities Now: Yesterday was a classic case of how the stock market has become a “Bad News is Good News” asset class. In this case, it was more “Good News is Bad News,” because both the retail sales and industrial production data were better than expected. The S&P 500 has seen its effective duration expand +20% above the historical norms of nearly 30 years, which means that interest rate sensitivity is dominating the cyclical exposure at the margin.